Italy’s One-Year Borrowing Costs Fall to Record Low at Auction

By Chiara Vasarri -
May 10, 2013

Italy’s one-year borrowing costs fell
to a record low at a sale of 10 billion euros ($13 billion) of
bills after the new government reiterated a commitment to keep
the deficit within the European Union limit.

The Rome-based Treasury sold 7 billion euros of 365-day
bills at 0.703 percent, down from 0.922 percent at the previous
auction April 10. Investors bid for 1.16 times the amount
offered, down from 1.64 times last month. It also sold 3 billion
euros of 219-day bills at 0.393 percent.

The auction comes one day after Prime Minister Enrico
Letta’s new government confirmed its intention to postpone the
payment of a property tax due in June as consumer spending
slumps and joblessness remains near a 20-year high. Finance
Minister Fabrizio Saccomanni said yesterday that the government
wouldn’t need additional budget cuts to cover the lost revenue
and remained committed to holding the deficit to less than 3
percent of gross domestic product.

Europe’s fourth-biggest economy is probably in its eighth
quarter of contraction as austerity measures adopted by the
previous government to control the budget gap deepened the
slump.

Italy’s 10-year bond yield rose 1 basis point to 3.9
percent after the sale at 11:12 a.m. in Rome. Italy returns to
the market May 13 with the sale of longer-maturity bonds.